WBD017 Audio Transcription
Why Small Blocks are Important for Bitcoin with Samson Mow
Interview date: Friday 18th May
Note: the following is a transcription of my interview with Samson Mow. I have reviewed the transcription but if you find any mistakes, please feel free to email me. You can listen to the original recording here.
In this interview, I meet with Samson Mow, Chief Strategy Officer at Blockstream, to discuss the scaling question and the role of the Lightning Network in that debate.
“There is nothing wrong with the BCash chain, it’s just the way it is being presented to people and marketed to people. It is kind of dishonest when Litecoin has faster confirmations when they say we are for payments.”
— Samson Mow
Interview Transcription
Peter McCormack: Hi Samson, how are you?
Samson Mow: Hi Pete, I'm good thanks.
Peter McCormack: Thank you for agreeing to do this. When did you get into the city?
Samson Mow: Just last night.
Peter McCormack: What are you looking forward to this week, what are you hoping to get from Consensus?
Samson Mow: We've a lot of meetings planned. We have a demo in the Blockstream room, so we're just hoping to meet people, chat and talk about some of the things we're working on and that'll be good for us.
Peter McCormack: Brilliant. It's very good to have this interview with you just a few days after the Roger interview, because naturally I got a lot of flak. So, before we get into that, and trying to have an impartial and balanced counterargument to my interview with Roger, can you just introduce people to who you are and what your role is at Blockstream and a bit about your background?
Samson Mow: Sure, so my name is Samson. I'm the Chief Strategy Officer at Blockstream, looking after marketing, product management and biz dev. Before Blockstream, I was at BTCChina or BTCC. I was a COO there; I was taking care of the exchange and mining business units and we were one of the largest exchanges and mining pools in the world. Originally, I'm from the game industry, a producer, director of production. I've made games like Dawn of War, Company of Heroes, Might & Magic, franchise games and The Smurfs.
Peter McCormack: Okay, and for the people who won't be aware of Blockstream, because not everybody is, can you explain who Blockstream are and what they do?
Samson Mow: Sure. So, Blockstream is a blockchain infrastructure company; we are mainly focused on Bitcoin technology. We do a lot of contribution to open-source projects like Bitcoin, we contribute on the Lightning Network. We have the Elements project, an open-source project forked from Bitcoin where we do a lot of R&D and stuff. That's where our sidechain repo is. Yeah, we also have GreenAddress; it's a mobile wallet, iOS and Android and it's a multisig wallet, so it's secure. If you lose your phone, people can't just sweep your funds off it; you have to sign from another device as a back-up. We also have Blockstream Satellite.
Peter McCormack: Yes, I saw about that. That seemed like the coolest project of all.
Samson Mow: That's probably the one that inspires people the most; it's a blue-sky project. We have these duo-synchronous satellites that we lease space on, and we broadcast Bitcoin blocks around the world. We're coming up to full global coverage probably in a month or two.
Peter McCormack: Does that get over the great China firewall?
Samson Mow: If you have a dish, then yes.
Peter McCormack: Wow. Just for context, so everyone understands, Blockstream are funded by venture capital?
Samson Mow: Yes.
Peter McCormack: Did I read right, to the tune of about $151 million?
Samson Mow: No, it's $81 million.
Peter McCormack: So, Crunchbase is $151 million?
Samson Mow: They might have gotten that wrong.
Peter McCormack: Even so, $81 million. So, how does Blockstream make money, where's the revenue channels?
Samson Mow: I forgot one of our projects; it's a partnership with ICE. They're the owners of the New York Stock Exchange. We have a cryptocurrency data feed that we're working on with them; that is one of our projects that's revenue generating. We'll have a rev share on that. Then Liquid, we will probably monetise later on. I probably forgot to introduce Liquid earlier.
Peter McCormack: Liquid, is that your sidechain project?
Samson Mow: Yes, that's a sidechain, it's a strong federation, so it's an inter-exchange settlement network that lets people move funds quickly between exchanges and institutions.
Peter McCormack: If you're contributing to Lightning and Bitcoin, you don't have any equity in Lightning or do you have equity in Lightning or is it just a contribution? How does that actually work?
Samson Mow: It's just a protocol that we contribute to; it's all open source.
Peter McCormack: It's all open source. Are you able to monetise from that?
Samson Mow: There's different things we're thinking about. There could be some hardware play that we're exploring, but right now it's still a very early stage 2, we're thinking about monetising.
Peter McCormack: You're building up the infrastructure of the company and working alongside the other teams that are developing the protocols with future plans to monetise?
Samson Mow: Yeah.
Peter McCormack: Cool, that's a great introduction. So, just to give you an introduction to my audience so you know the type of people we're talking to and my background: I'm 18 months into crypto, although first explored this about four years ago. When I came in the space, I found it very difficult to find useful information for people who don't have a technical background and impartial information.
So, what I try to do is go and meet the key people, but have conversations that maybe those who don't have a technical background can understand, who maybe are intimidated and getting involved in Reddit and just want to understand where they should invest and shouldn't invest, because we do have people whose first exposure may be something like Coinbase, they're introduced to four coins, four tokens and they won't know which to buy and why. So, that's an introduction to my audience.
Also, I mentioned I'm going to try and be as impartial as possible and ask probably questions that people would want me to ask you from the big block side, as I asked Roger from the other side. I'm going to be as impartial as possible, but I'm not going to cover certain things which I don't think are so important.
Samson Mow: Sounds good.
Peter McCormack: To begin with, just on a personal level, I was listening to an interview with Adam on the way and it's a very old Epicenter one, I think it was episode 95, interestingly referring to it as a $4 billion network; but they asked him what is Bitcoin, and I think it will be quite interesting just to ask you the same question. What is Bitcoin to you?
Samson Mow: I think I'd like to answer Bitcoin is digital gold, just because it resonates with the vast majority of the population. It's easier for people to conceptualise and really understand what that means, but it's really a lot more than that. To go into it, you need to spend a lot of time, because it is essentially information that we ascribe value to now, and that is a big game changer because we've never been able to do that in human history before, where we take information and transact it as if it were money.
Peter McCormack: Digital gold, therefore store of wealth.
Samson Mow: Yes.
Peter McCormack: Do you, therefore, not see Bitcoin as a medium of exchange or do you see that it is both?
Samson Mow: I think it is going to be everything that money is. So, money is a store of value, medium of exchange, unit of account. I think Bitcoin will be all of those things and it's advancing along this path simultaneously. So, traditionally with assets like precious metals that we used as money in the past, it first starts out as a store of value. Actually before that, it's a collectible item; people collect it because it's cool and then they discover that it has unique properties or interesting attributes, like gold doesn't tarnish and it's easy to melt down and reform and whatnot. Eventually, it becomes a store of value because people think it's valuable.
Then it's a medium of exchange; they start transacting it, because they know that "I can trade this for products and services". Eventually, it will become a coin and you can use it is a unit of account. But Bitcoin right now, it's pretty much a store of value and some people say it's not, but that's just due to volatility. But we're watching the evolution of this digital money over a period of a decade. For a precious metal store of value, currencies and monies, those evolved over hundreds and thousands of years. So, Bitcoin will be volatile in the meantime, but it is a store of value because over a long enough timeframe it's storing your value; it doesn't really go down.
Peter McCormack: Quite interestingly, I mentioned to you before we started, I interviewed a journalist called Alejandro from Venezuela earlier this year. When Bitcoin dropped from $20,000 to $5,800, because of the rate of inflation in Venezuela, if you held Bitcoin, your value in the Venezuelan bolivar went up. So, I think it's from a perspective; it's a store of value. Also, I don't know if you'd think about this, but for me for a store of value doesn't always mean it has to go up in value, so it's holding.
Samson Mow: That's just the bonus.
Peter McCormack: Yeah, that's just the bonus. Actually, if you look at gold, gold's volatile just over a much longer timeframe.
Samson Mow: Yes.
Peter McCormack: Okay, so --
Samson Mow: I have a bit more. So Bitcoin, back when it was starting out, it was a medium of exchange because it was very cheap to transact because no one was using it. But as anything matures, there will be a cost to transact. So, Bitcoin, when the fees were very high last year, that was a bad medium of exchange because it's very expensive to transact. But traditionally, Bitcoin also is slow to transact too because there are ten-minute block times.
The interesting thing now with Bitcoin, this is why I'm saying it's evolving on three paths simultaneously, is it's also going to become a unit of account at the satoshi level by transactions over the Lightning Network. That's why Bitcoin is very unique; because it's information that we can transact as money, it can evolve along these three paths simultaneously. As Lightning grows, Lightning Network grows and develops, it will also become a medium of exchange too.
Peter McCormack: This is an important question because obviously there's a certain tweet I've read that you put out. Who do you believe Bitcoin is for?
Samson Mow: I think Bitcoin is for everyone in the world.
Peter McCormack: And it can be for everybody?
Samson Mow: Yes.
Peter McCormack: At any level of income?
Samson Mow: I think so.
Peter McCormack: My last question before we start talking about the bigger issues, what do you think it's going to take for Bitcoin to become usable and people will want to use it instead of fiat? At the moment, it's essentially a collectible around people I know where I live; no one's really spending it. My only use case for spending it is buying mining gear and paying my mining costs, because it's international, so it's quick and easy. What do you believe it would take to transition Bitcoin to be something that many people will use it on a daily basis instead of fiat?
Samson Mow: I think the key to that is a circular economy. You have to be able to earn it and spend it, because if you're earning fiat and you need to convert it, that's a really big barrier for most people. You don't want to earn in fiat and then exchange it at a cost, because if you're buying on exchange, you're paying the exchange to change your money. If you have to do that, then it's really not conductive to spending, right.
Peter McCormack: Right.
Samson Mow: You have to top up all the time and go and exchange and spend it. But if you have a circular economy where you're earning Bitcoin, that means it's much easier to spend it, because you don't need to hold the Bitcoin. Let's say you have a service selling coffees and you're earning Bitcoin and that evening you'll go and spend Bitcoin to go and watch a movie or something like that.
So, the key to that circular economy is to remove friction in spending Bitcoin and using Bitcoin, because Bitcoin was a horrible way for people that are not really interested in tinkering around to collect money, to earn money, because you do have to wait for confirmations; it takes a minute to confirm in a block. It's not always ten minutes, it can be highly variable.
Peter McCormack: Six hours.
Samson Mow: It could be depending on the network and then the fees are unpredictable too.
Peter McCormack: Yeah.
Samson Mow: I think Lightning will be the key to establishing that circular economy where people can earn easily and spend easily because the fees are going to be negligible.
Peter McCormack: That's very interesting. I've never actually heard anyone put it that way, but funnily enough, that's exactly what happens with my mining; I get paid in Bitcoin and it's just much easier to pay in Bitcoin. I guess that's going to first happen for people who have probably small independent businesses, small independent online businesses, because we're probably a long way away from large companies paying their staff in Bitcoin?
Samson Mow: That's a good question. I think a lot of large companies did look at Bitcoin as a way to earn money, accepting Bitcoin as payment. But then they discovered there are drawbacks; fees are unpredictable, they can be gamed and also confirmation times are highly variable. But if you have Lightning, if some of these guys that are still accepting Bitcoin make the switch over to Lightning, let's say major payment point of sale terminal integrated, then that would be a big game changer.
Peter McCormack: Yes.
Samson Mow: I think if it happens, it's going to happen very quickly; people will just make a switch and you'll see this ability to earn and pay. If they're able to earn, they should be able to pay at various points.
Peter McCormack: Of course, yeah; interesting. What I want to move on now to is talking about the scaling issues that have been plaguing Bitcoin probably for two and a half years now; it seems to be never-ending. I'm going to try to be as impartial as possible. One thing in my experience going through this now is, it feels like the whole thing is actually quite embarrassing. Do you get that feeling at all that it's embarrassing for Bitcoin to be going through this and this kind of tit-for-tat war?
Samson Mow: Well, because it's open source and to answer your question, yes, it is embarrassing. Ideally, we wouldn't have it, but it's also inevitable that we will have it, because scaling is like a bedshed. Everyone can have an opinion on scaling, everyone can have a thought of how big the block should be, or whatever. It's easy to pick a number; should be 1, 2, 4, 32. It's just really an amorphous thing that's not really practical to needle on, because if we want to scale Bitcoin, we don't want to gain 1% of scale; we want thousands of percent in scale. No matter how big you make the blocks, you'll never achieve thousands of percent scale. That's why we need Lightning, right?
Peter McCormack: Yeah.
Samson Mow: You need magnitude, orders of magnitude need more scale. So, it just got stuck on the block size. I think it was Gavin Andresen who said we should increase the blocks, because if you ignore consensus rules and you ignore the difficulty of getting consensus, then technically on paper it's easy to make this thing from 1 to 2, to increase it like that. But we actually don't have a good way to increase it without causing a split and that's what it comes down to. I think the scaling debate overall was just a very big waste of time.
Peter McCormack: For people who don't understand consensus rules, could you explain that?
Samson Mow: Bitcoin is just software and the software has many rules in it. So, there is the 1-megabyte block size; there is the block times, roughly ten minutes; a block reward, it was 50, then 25 and then 12.5. Even in mining, there is a consensus rule where you cannot spend coins until after 100 confirmations.
Peter McCormack: 100 blocks.
Samson Mow: Yeah, 100 blocks. So, there are a lot of these rules where you can't really change any of them unless it's done through a soft fork, which doesn't require everyone to upgrade at the same time. So, if you just want to change one, the easily contentious one would be the number of Bitcoin in existence, 21 million Bitcoin. If you wanted to double that, no one would agree. But it's the same principle for every other rule; you still need everyone's consensus to change that rule and just like the 21 million Bitcoin cap, you cannot change the block size without everyone agreeing.
Peter McCormack: Rules are submitted through a BIP?
Samson Mow: Yes. BIPs are just to improve Bitcoin in some way. Say you wanted to propose a consensus rule change, you would submit it through a BIP.
Peter McCormack: Who gets to vote on the decisions?
Samson Mow: Generally, it's just the developers discussing it and then giving an ACK or a NACK, if it's a good idea or a bad idea. It's like a technical meritocracy.
Peter McCormack: If there was the desire to increase the block size, who are the people actually who come together to make that decision?
Samson Mow: Generally it's the Core developers and they'll reach out to other people too to solicit feedback; it's a process of seeking consensus or a rough consensus, which is finding something that more or less everyone can agree that's not bad.
Peter McCormack: Okay. So, when I went out to interview Roger and wanted to see another side of the debate, there was an awful amount, an awful lot of quite abusive trolling and comments coming back saying that I shouldn't be providing a platform to a scammer and a fraud. Similarly, I had the same with Craig Wright and adding to that, we also had Vitalik at Deconomy right in front of you saying, "Should Craig Wright be here?"
What do you think of people -- I separate Craig and Roger because I don't see Roger so much as a fraud, I just see him doing things that just piss people off -- what do you think of people saying we shouldn't be giving a platform to these people?
Samson Mow: In an ideal world, there would be no platform for scammers and fraudsters.
Peter McCormack: Yeah.
Samson Mow: But they'll find their own platform. I skimmed through some of your other podcasts, and you try to present an even view on things, so I think it's a good thing what you're doing to drill into it and find some facts or truths in things. But no matter what, they're going to find their own platform; they'll weasel their way into some stage or conference and give their sermon.
Peter McCormack: Do you believe that Bitcoin Cash, therefore, is a scam and not just a fork?
Samson Mow: The coin itself is not a scam, but the way that it's being marketed by the people supporting it is definitely a scam. They're deliberately trying to confuse people to think that it's Bitcoin with every single underhanded tactic in the book. So, I would say the marketing of Bcash is a scam.
Peter McCormack: I actually think those efforts though are counterproductive.
Samson Mow: They are.
Peter McCormack: I think they would be more successful, and I said this to Roger, I said, "I think if you presented an even, unbiased view of both coins, pros and cons, you would probably be more successful, because what you are doing is you are turning yourself into the enemy and creating reasons for people not to like you".
Samson Mow: Okay, I would go further with that. If they really wanted to make Bcash, none of them should even be in the spotlight. They should just launch it and then don't even talk about it, and then they would actually probably be decently successful.
Peter McCormack: It has use cases, it has certain use cases over Bitcoin at present.
Samson Mow: No, I don't think so. What's the difference between Bcash and Litecoin and Dogecoin?
Peter McCormack: That's a slightly different point. I'm talking about between Bitcoin and Bitcoin Cash. I've looked at Ryan X Charles, what he's done with yours.org and I've looked at Brian Hoffman and I've seen a definite issue with e-commerce retailers wanting to accept Bitcoin, in that it's just not practical on a number of levels. Therefore, there is an opportunity for Bitcoin Cash.
Samson Mow: But isn't Litecoin just as good?
Peter McCormack: I would ignore Dogecoin at the moment.
Samson Mow: Okay.
Peter McCormack: There's that one separately, because I just think it's a meme coin and it's essentially a pump and dump coin for traders; it's super volatile and doesn't really -- it's a joke.
Samson Mow: We can return to Dogecoin afterwards.
Peter McCormack: In terms of Litecoin, not a lot, not a lot of difference.
Samson Mow: Block times are faster.
Peter McCormack: Block times are faster, but Litecoin is very much aligned to Bitcoin and there are fair arguments to say that Charlie Lee's position of placing Litecoin almost as your chequing account and Bitcoin as your savings account has been great for Litecoin. I can understand that maybe the Bitcoin Cash people don't want to align themselves with that anyway. I don't see them going, "Okay, we'll all go and work for Litecoin". I think they fundamentally believe what they're doing is right and they fundamentally believe they should be able to use the Bitcoin brand. I don't agree with it, but that's why I think they're doing it; so, I think they have a use case.
Before we get on to that --
Samson Mow: You still haven't answered the question though.
Peter McCormack: What has it got over Bitcoin?
Samson Mow: If you just want something for payments, then you could use Litecoin.
Peter McCormack: Yeah, and if I just wanted to drive my kids to school I can use a BMW or a Mercedes; it's the open nature of competition. One of my things I found with Roger, I also think he's a very competitive businessman. I think he wants to win; I think he fundamentally believes he's right; but I think he's a businessman as well. I think he thinks he can do a better job than Litecoin and I think that's one of the things. I don't think there's a huge amount of difference, but I don't think there's a huge amount of difference between the BMW and Mercedes and this just comes down to business competition.
Samson Mow: Yeah.
Peter McCormack: One of the things that has come up quite a bit -- okay, one thing that's very hard when you're thrown into the space and you haven't been in it for seven years and you're not technical is, every argument seems to then have a counterargument and then every counterargument has another counterargument and it's very hard to find truths; it's really quite difficult. And there are certain things I've researched, so for example a number of the Bitcoin Cash community have said to me, "If you're interviewing Samson, you've got to ask him about Blockstream's influence over Core", and I said to you before, I'm not going to ask you because I've done my researches, it's circumstantial to me; it's not a question.
But one thing that does seem to happen, and I'd be interested in your perspective on this, the arguments about censorship do seem to exist. From my research, there definitely seems to be censorship on r/Bitcoin. Have I got them the right way round; I always forget them now, because I don't use Reddit anymore because it's so toxic. What are you views on the censorship? Do you agree it exists?
Samson Mow: I think it's moderation. It is a private forum on the centralised service that some people set up. So, if you registered r/Bitcoin back in the day, then you would be moderating it. If people started talking about altcoins and trying to sell things, you'd probably take those down because the topic's supposed to be about Bitcoin. There's a line between censorship and moderation and I think that they're conflating the two things. There is definitely moderation happening; they don't let you go and spam and promote your ICO or whatever.
Peter McCormack: I agree.
Samson Mow: If you're disrespectful or you're swearing or whatever, people are probably going to ban you. I think that's reasonable, because it is a forum run by some guys, right?
Peter McCormack: Yeah.
Samson Mow: r/btc has its own method for moderation.
Peter McCormack: Downvoting.
Samson Mow: Downvoting, so it's really one and the same. I don't think that any of this is really censorship, because censorship is when you have no way at all to express your views. If you're being moderated on a forum, you can make your own forum which he did, and if you can't open up a forum on Reddit at all, you can go and spin up your own.
Peter McCormack: Yeah.
Samson Mow: Censorship is really like you're being censored and you have no way to access the internet in your country or something like that, and you can't even post about something.
Peter McCormack: I think there's different levels of censorship. I think there's also hypocrisy in that it is a private forum, so it has its own rules. Where then also Roger gets accused of misusing Bitcoin.com and I don't like the way he does, but again that's a private commercial domain name. So, I feel like if the defence for r/Bitcoin is that it's privately owned, I think Roger's probably equally within his right to use the defence of using the dotcom in his way, not the mis-selling of Bitcoin Cash as Bitcoin; that I just completely disagree with. But in terms of using it to push his Bitcoin Cash, I think it has the same -- they're either the same or they're not. Do you understand my comparison?
Samson Mow: Yes.
Peter McCormack: I agree also on r/Bitcoin that moderation of talking about altcoins and ICOs, completely agree, but it does feel like the block size is something that should and could be debated. From my research it seems like posts related to block size have also been removed. To me, that does move into censorship. I think there's different levels of censorship; you've got nationwide censorship, but I think you can have censorship in certain zones.
I don't believe it's detrimental to them getting the message out, but I think it personally, from my research, feels like it's denial of people when people say there isn't censorship there.
Samson Mow: Yeah, you could say that; I just don't think it's really censorship. To go back to your original question, we don't support that forum at all, I don't even post on Reddit. I had an account maybe three years ago and I posted once or twice, but I don't think a lot of people from Blockstream use Reddit at all.
Peter McCormack: I don't use Reddit at all anymore as well; I find it's usually toxic. I find Twitter's certainly still toxic but a better forum. Whether or not Blockstream use it, we're talking about communities, and from what I see I think if we're going to criticise people, we need to make criticisms fair and not just say everything they say is bullshit because I don't think we make progress.
One of the sad things I find about the community is that, it's like the comparison I gave to Roger and I give to other people, it's like football teams; both are in one camp and you support this team and you support that team, and everything you say I'm going to disagree with and everything you say… and almost like politics, Republicans and Democrats. It doesn't matter what Donald Trump does; he can do the worst things; people are still going to vote for him. I find that is counterproductive to anyone making progress.
Samson Mow: What matters for Bitcoin is the software.
Peter McCormack: Yeah.
Samson Mow: Bitcoin and Bitcoin Core client attracts a lot of developers. In the last few months, there's been a huge spike in people contributing code. Ultimately, if you have this digital gold that is powered by software, you want software developers. I think most software engineers, cryptographers, mathematicians, everything, they all gravitate towards Bitcoin not towards Bcash.
Peter McCormack: Yeah, yeah, I understand.
Samson Mow: You can debate everything on any forum anywhere, anywhere in the world but ultimately who's building it and that's what's more interesting, I think.
Peter McCormack: That is interesting and the next point I was moving on to, scaling, and one of the things I also find disappointing in trying to look at both sides is, when I've been reading up on the Lightning Network, it feels to me that for the Lightning Network to scale, there will inevitably have to be an increase in the block size at some point anyway, from everything I've read, depending on the size. But eventually, if enough people are using Lightning Network, there'll be enough transactions going on to the mainchain that still will have to scale at some point.
I think it's a shame that, if it's inevitable, there wasn't an increase in the block size in the short term to alleviate pressure on the network, because again, one thing I felt sorry for Roger is he did a lot of work to promote Bitcoin and to get retailers to accept it, and then retailers had to stop accepting it and then had to start looking at altcoins. I look at OpenBazaar with Brian Hoffman, I look at as I've said Ryan X Charles who I've spoken to. Do you not see it as a backwards step that some retailers now can't use Bitcoin?
Samson Mow: The thing is you could always use Bitcoin; it's working perfectly. When there is high demand, the fees will go up; when demand is down, the fees will come down. The issue more is that it is an open permissionless network, so people can come in and they can gain the fees. I think the huge spike towards the end of 2017 was some group gaming the fees, and some of the analysis done by some people on the space did show that it is being gamed and pushed up.
To really understand it, you have to look at there's different incentives for different groups. If you're a miner, then you want the fees to go up.
Peter McCormack: Of course.
Samson Mow: That's why it's ironic that some of the miners are saying, "We need the bigger block size", because that actually cuts into their revenues. But those fees definitely made a lot of miners, mine pools very rich in that period, because it was just ridiculous how much money was being taken off for fees. But there's no guarantee that fees can stay low in this kind of system; that's why Lightning will help us get towards that circular economy, because the fees will stay low for Lightning and predictable. Without that predictability no merchant can really accept it.
The way it works now is that any blockchain where transactions are paid for by fees, they will get expensive when there is usage; it's just simple supply and demand, unless you keep on increasing the block size. But then it's not a really decentralised chain, because if someone is in control of it they can say, "On this day, we're going to go to 32" then you're still on for the ride. At least with Bitcoin we know it's decentralised, no one can force a change-through.
So, the NYA 2x thing was a pivotal moment for Bitcoin, because it showed that a group of companies can't force change on a system.
Peter McCormack: Which was great.
Samson Mow: Yeah, which is great. If you want an asset that no one can mess with, then that's what you want, that nobody can force a change-through. But if you can keep increasing the block size to relieve that pressure on the fees, then they can do anything.
Peter McCormack: Your advice then to a Brian Hoffman or to a Ryan Charles, would that be you'd need to wait for Lightning Network?
Samson Mow: Well, you can contribute to Lightning Network, or you can do other things like promote certain business to batch transactions. A lot of exchanges were not batching transactions.
Peter McCormack: No, I mean in reference to their present issues. Say, if you have a website that's selling things for anything from $1 to $50, Bitcoin is unusable for you if probably the cost of the transaction is over 5% of the item that's being bought.
Samson Mow: Yeah.
Peter McCormack: If you're selling dollar items and fees in dollars, it's a waste of time; and if you're selling even $100 items at a $30 fee, it's a waste of time. But they're facing real issues that they've built parts of their business on accepting crypto.
Samson Mow: I think a lot of businesses built themselves up around Bitcoin as a payments network and Bitcoin is not a payments network. If it was a payments network, we wouldn't have to wait ten minutes for confirmations, we wouldn't have a fee market that can go up and down, but the fees right now are very low. I need to say that again because people still say the fees are high. The fees right now are very low; if you're trying to do --
Peter McCormack: It's 20 cents now?
Samson Mow: Yeah, 20 cents to $1 depending on the day. But the fees are like the weather; some days it's going to be sunny, some days there's going to be rain. You can't predict the weather perfectly.
Peter McCormack: Of course not.
Samson Mow: And you have to accept that some days there will be rain, sometimes the fees will be high based on usage. But that's just supply and demand. If you want to alleviate that, then you'll have to have a dynamic block size or something like that or just increase it all the time.
Peter McCormack: Is a dynamic block size something that is possible and has been looked at?
Samson Mow: That's also not a good idea, because that can also be gamed.
Peter McCormack: Okay.
Samson Mow: Anybody can come into the network and do something to adjust the fees.
Peter McCormack: I'm still at that point though with Brian and Ryan, still thinking they have a business that was built on something that did appear to be a payment network, sold to them in the belief that it was. I doubt the digital gold name existed as much then; they still have to make a choice. I don't think they're just going to close their businesses down and give up because there are alternatives out there.
So, what would your advice to them be, because it seems like they have three choices: accept the variable fees and your customers accept it, wait for Lightning which we still don't know when it will be fully usable, or use an alternative currency.
Samson Mow: They can really do whatever they want. They built their businesses and they have to take responsibility for building on Bitcoin as it is, not as they think it might be or understand it to be. So, if they misunderstood the design of the system and thought this is for payments and fees are always going to be low, then I can't really help you.
You can do many things. You can build Lightning, right. I don't know if they have the capabilities to contribute. They can take an altcoin or they can wait or they can lobby and try to effect change that can benefit them. So, one reason for the fees getting blown up was that a lot of businesses and exchanges were not batching transactions. Once they started batching them, that just reduces the backlog in the network. I think what it comes down to is they weren't prescient enough to look at the system as a whole and understand how it works its scale.
If you take this as an example, I can trade you little tiny leaves of gold to pay for something and that might work really well for small amounts. But let's say everyone is using that and people start moving a lot of gold around, well those little leaves of gold are going to become big blocks of gold and that's going to be heavy and hard to transport. But that's the reality of the system because that's the property of gold; it is quite dense and quite heavy and you can't complain and say, "Gold's too heavy now" because you didn't understand it was heavy when it saw a little leaf of gold.
Peter McCormack: This is where we have competing altcoins then, different use cases. So, this is probably why Bitcoin Cash has a use case at the moment, because they can, they are selling it as a payment system.
Samson Mow: So is Litecoin.
Peter McCormack: No, I'm not disagreeing with that as well. What I'm saying is, this is just a fundamental disagreement about what it is.
Samson Mow: Here's the thing: Ripple fields those payments too and because they're so much more centralised, they're actually cheaper and faster.
Peter McCormack: I wouldn't disagree with that. I personally wouldn't build anything on Ripple.
Samson Mow: Nor would I. You see, there are trade-offs.
Peter McCormack: Yeah, of course.
Samson Mow: This is the one thing about all these systems and this whole debate about scale.
Peter McCormack: It's like protocols as well, like EOS to Ethereum.
Samson Mow: Yeah. I was talking to someone and he wanted to actually use a blockchain for a payment platform and I just told him, "Don't use a Bitcoin because you'll never achieve the scale you want, where people are buying things for $1 or $2 and there's millions of them; it just won't work. So, find some other model". But a blockchain is not a really good way to build a payment system.
Peter McCormack: The Bitcoin Cash team aren't going to stop, their products aren't going to go away, they are going to build it until it's a success or it's a proven failure or nobody uses it. Therefore, I guess it is a competitor to Lightning Network and by the time Lightning Network is fully ready for retail adoption, it will have to sit alongside Litecoin, it will be seen as a competitor product.
Samson Mow: Sure. They're welcome to compete.
Peter McCormack: Yeah.
Samson Mow: Like I said, there's nothing wrong with the Bcash chain; it's just how it's been presented to people or marketed to people. It's dishonest when Litecoin has faster confirmations that they say, "We're for payments". You have something built for payments, built as a payment solution that has 10-minute block times and something built for payments with 2.5-minute block times. I think it's a bit misleading to say, "This thing that takes ten minutes is better for payments". Now, they're marketing zero confirmation transactions, unconfirmed transactions as safe and it's really not.
Peter McCormack: And I get the Litecoin comparison, but Audi are going to market their cars as better than BMW. That happens; everyone does that.
Samson Mow: Litecoin will market its payments and they will market for payments and people will use whatever they like.
Peter McCormack: I'm just guessing they have a head start on Lightning Network in terms of going for retailers, and retailers will have to just make a choice when Lightning Network's available.
Samson Mow: They might manage to scam some people that haven't done their research.
Peter McCormack: Can you empathise with anything they're doing? Those pauses I won't edit out, because if you can't, that's fine but I always think it's good to just try and…
Samson Mow: I can't really think of one really nice thing that they're doing.
Peter McCormack: I struggled with the zero confirmations, the marketing of this. With Bitcoin you tend to find it's six, but some places actually accept two confirmations. What is the justification for zero confirmations; how are they explaining that?
Samson Mow: They're just saying it's a verified transaction or something; it's just marketing. It's the same thing under the hood, it's still unconfirmed transaction.
Peter McCormack: Okay. So, I think it's probably a good time now to talk a little about Lightning Network.
Samson Mow: Sure.
Peter McCormack: I've got a bunch of questions. I've spent the last couple of days looking at it again; I've looked at it before and I'm looking at it again. One of the things that was very misleading for me is when you look at the YouTube videos, it sounds really complicated and what I realised is that those videos are explaining it under the hood. When it was all explained, I was a bit worried for users that this would be overly complicated, but again I think it's good time for maybe you to explain what Lightning Network is, why it's important and how it works.
Samson Mow: Sure. I'll try my best; I'm not a protocol expert by the way.
Peter McCormack: Don't worry and I'm going to speak to Jameson later in the week and get him to go into detail.
Samson Mow: Okay. So, Lightning is essentially a payment channel and it's a network of payment channels. If I open up a channel with you, it's like we open up a tube and then we either fund the tube with some, let's say liquid for this example; we can push that liquid through the tube back and forth. Or I can open up a channel with you and only I have liquid in the tube and I can push it to you. So, you actually don't need Bitcoin to receive Bitcoin over Lightning; it's a layer 2 solution, so it's not on chain. The premise is that not every transaction needs to be recorded in a blockchain.
With the blockchain you're expending a lot of electricity, a lot of energy resources to mine it, secure it and that's actually quite valuable. So, transactions on chain should be things that you need to be very secure and maybe for larger amounts.
But for Lightning you'd use that as your wallet, basically; the amount you'd keep in your wallet would be the amount you put in a channel. So, you just spend freely and it doesn't need to be written on the chain, because not everything needs to be written on a chain and by that way we can scale, because you can open channels with everybody and you don't need to know the content, capacity and details of everyone on the network and every channel.
Peter McCormack: It seems to me that it's taken a long time and it's obviously a hugely complex and a big project. When do you think it will get to the point where it will be usable without fear, because everything I've seen that's usable, every use case at the moment, it's like investing, is saying, "Don't spend any money you can't afford to lose because we're still in beta". How long do you think that process is, what's the estimate on that?
Samson Mow: I think it's still very early. We've been in beta for a few of the clients for maybe five weeks, so it's still very, very early days, maybe six weeks now.
Peter McCormack: It's on the Blockstream website?
Samson Mow: We have an implementation, it's an Elements project.
Peter McCormack: Okay.
Samson Mow: It's C-Lightning and then there's ACINQ in Lightning Labs, LND. But it's still very early days. People are still coming up with wallets, the whole UX aspect of it is still very much under development. But I think we'll start seeing some serious use by the end of the year by early adopters and then I think next year it'll probably blow up a lot.
Peter McCormack: In these early five weeks, what are the key challenges you're coming up against?
Samson Mow: For us, we're still not in beta, so C-Lightning is still alpha state. We're just bug fixing, stabilising and working out compatibility with the other implementations right now.
Peter McCormack: What are the biggest challenges for Lightning itself?
Samson Mow: I think it's probably going to be UX. Once we've nailed down everything on a protocol level and interoperability, then it's just making a simple, easy-to-use experience for the average person. If you have an SPV wallet on your phone for Bitcoin, it's pretty easy to use. But it took us a long time to get here actually, years.
So, it's going to take Lightning time too, but there are a lot of talented guys working on it. You have Jack Mallers out there on Zap and a whole bunch of other wallets out there. ACINQ has a mobile wallet and I saw two other ones coming out on iOS. We'll probably get Lightning into GreenAddress too, so it's all coming and I think everyone is very motivated to deliver on this experience to people because of the whole drama. You know there's a saying, "Cypherpunks write code"?
Peter McCormack: Yeah.
Samson Mow: When there's all this b/s and people are spreading lies and coders are going to code and they're going to build stuff and that's what we're seeing.
Peter McCormack: I'm going to talk through what I've looked at and the questions I have and the concerns I have. Tell me if I've misunderstood it, I've got something wrong. Say if I first want to use Lightning Network, I go into a tea shop and want to get a cup of tea and they ask me to pay and I go to pay with Lightning, will the channel open up automatically without me even having to know I'm opening a channel, or the first time I transact with the tea shop will something have to happen that's different?
Samson Mow: If you have a channel open and ready and there's adequate capacity in the network, then you should be able to just pay them, even if you're not directly connected to them. But if you have no channel, so you've just downloaded the wallet, then you'll probably open up a channel directly to them and then you just pay them directly.
Peter McCormack: At the point of opening up a channel, I'm trying to imagine the use scenario. Am I still just going to point and that all just happens under the hood and I don't even know about it?
Samson Mow: Yes.
Peter McCormack: Or I'm going to have to do, is it almost part of it is, "Open your first channel"?
Samson Mow: Yes, there will probably be that eventually. Then, once you have a channel open it's just, "Can you find a route?" If not, then they might say, "Would you like to open up a channel directly to the person you're paying?"
Peter McCormack: That kind of user experience already sounds like something which is going to be far too complicated for some people who are just used to tapping a card.
Samson Mow: Yeah, but if you just download a Bitcoin wallet on your phone, you still need to get Bitcoin into it somehow.
Peter McCormack: Of course, yes.
Samson Mow: That's difficult too, actually. The whole user experience of getting Bitcoin onto your phone is not that straightforward.
Peter McCormack: No.
Samson Mow: You need to buy on an exchange or something and then send it to an address.
Peter McCormack: Yes.
Samson Mow: Then you actually have to copy and paste addresses and that's how you get Bitcoin into your phone. So, it's the same idea; you'd have to be able to get a channel open first before you can transact, just like you have to get Bitcoin into your Bitcoin wallet.
Peter McCormack: It's almost like we don't really know what the user experience is going to be yet until we do it.
Samson Mow: There are user experiences now. How it will evolve over months and years, we don't know yet.
Peter McCormack: From what I'm reading, routing is something that hasn't been figured out yet or it's a challenge?
Samson Mow: No, routing's figured out. It's the channel capacity that's an issue right now, because a lot of people are just testing, they peg in maybe a few dollars or $10. If you want to do a bigger purchase, like we have things on the Blockstream website like T-shirts and hoodies and those are $15, $20 and $40, then you might fail in routing; so a lot of people have to open up a channel directly to us. But we're trying to open fat channels or bigger channels with some of the larger nodes on the network, like Bitrefill and Thor Guard.
Peter McCormack: If the routing fails, is the Bitcoin lost?
Samson Mow: No. It's just they cannot find a route.
Peter McCormack: It can't, okay fine. So, therefore, I come to my couple of next points is that, one of the things I read about is that your Lightning wallet will have to have your private keys exposed to the internet.
Samson Mow: Yeah.
Peter McCormack: We're told to protect our private keys in Bitcoin world, yet they may exist, help me out here when I get this wrong, they may exist within one of the nodes?
Samson Mow: No, it would just be on your side.
Peter McCormack: Okay.
Samson Mow: So, you already have your private key; if you have a SPV wallet, it's in here, it's just as accessible. I think there are some wallets where your private keys are in plain text, not encrypted on Lightning 2.
Peter McCormack: Yeah, of course.
Samson Mow: It's the same thing. You have to have your key in your wallet, just like your house key.
Peter McCormack: What if your wallet goes offline, yet you've still got the channel open. How does it close the payment without your private key?
Samson Mow: If you go offline, then you cannot receive a payment and then you will send the payment when you are online with your wallet.
Peter McCormack: Right, okay. Then I put it out there and Jameson was commenting on this and he said, "Consider this like the wallet in your pocket, don't carry around more than you'd want to lose".
Samson Mow: Exactly.
Peter McCormack: It's probably going to be $200 for most people. Then the scenario I'm imagining is, say I'm going on a shopping trip, I'm using it and suddenly I get to another shop and I've used up my $200. I'm going to have to transfer back from my mainchain wallet, which therefore means I'm going to have to use the mainchain, and therefore I'm going to have to wait for that confirmation time.
Samson Mow: Yes and no. So right now, you could do that if you have Bitcoin.
Peter McCormack: Yeah.
Samson Mow: If we have that circular economy, you might be earning Bitcoin over Lightning 2 and down the road, I don't want to say when but down the road, there will be Lightning ATMs where you just top up; you put in some cash and then they'll open a channel and push funds to you. Or you could go on to an exchange; this is another thing that's probably coming down the road, where you can withdraw on the exchange to your Lightning wallet; or, a mining pool might pay out over Lightning 2. So, instead of waiting for that one mining pool pay out a day, you get it as they mine.
Peter McCormack: So, there could be some people who exist only in Lightning Network and never come out?
Samson Mow: Yeah.
Peter McCormack: But also, if you were getting paid on the Lightning Network, you could end up having too much in your wallet that's too high risk, and then you're going to have to transfer back to the mainchain.
Samson Mow: Yes.
Peter McCormack: So, there are going to be a lot of people who are going to have to have that relationship between the mainchain and their Lightning wallet.
Samson Mow: But you would maybe manage that the same way you manage Bitcoin. If you have a mobile wallet on your phone, you might put $100 here and on your home computer, on an offline device, you put more. Then you put more in your safe or something like that. You could have a Lightning wallet that's online in your house if you're a business or whatever, and you collect most of your payments there. But on your mobile wallet, you just keep $100 and if you finish this up, you go and transfer from your other Lightning wallet to this one.
Peter McCormack: Say Lightning Network is hugely successful; it's going to have a lot of interactions with the mainchain still.
Samson Mow: Yes, it should.
Peter McCormack: Therefore, the mainchain could start filling up. Say the mainchain starts filling up, what area of fees do you think it would be concerning and there would be consideration of a block size increase, or does that not come into play? For example, say it's so hugely successful mainchain fees are back to $30, $40, would that be a concern, and therefore a time where a block size increase would be needed?
Samson Mow: Maybe if we have some good way to bring about a block size increase without splitting into multiple coins; I think that's what people are most worried about. When Monero hard forked to change their proof of work algorithm, then you had five Moneros coming up and they were mostly scammy.
Peter McCormack: Yeah, and most people ignored them.
Samson Mow: Yeah.
Peter McCormack: Say it can be done, what do you think an ideal price is for the mainchain for a transaction?
Samson Mow: It's not really about the price; it's more about being able to do it. I think first, we have to do the research and be able to do it. The biggest issue is that we haven't been investing a lot of that research into how we can actually do a hard fork safely. There's been research by Johnson Lau called Spoonnet, but since the scaling debate ended, I don't think he's been working on that and no one's been pushing a lot on that research.
I do think we have a fair way to go before we see fees being gamed like that. So, a lot of the reason why the fees could be gamed was because there wasn't SegWit. You could actually create a lot of outputs and pump up the price like that, pump up the fee price. Now with SegWit, it's much more costly to do that same thing, and that's why we have seen the spam and manipulation of the fees happening. Also, we do have more block space now, more exchange are batching transactions. It could be years before we need to worry about very high fees.
Peter McCormack: Of course it could be, but at the same time I still think it's a healthy thing to discuss because if and when it does happen, it will be an issue. I'm trying to understand from someone in your position what you think a healthy or unhealthy mainchain fee is, because I have then following questions.
Samson Mow: I really don't have an answer for that. It's either you believe in the free market or you believe in socialism, because to keep the fees at the right level is really just deciding a market price and that's not free market; you're deciding there's a right price for a fee. But if demand is massive, then the fees have to go up and the fees do have to go up in the end, because the subsidy will keep on decreasing. So, there should be an expectation of fees to go up because in a year plus, we'll see another halving and there will be less incentive for miners to mine.
Peter McCormack: Yeah.
Samson Mow: They'll have to earn through fees, so fees do need to go up. I don't really have an answer what the right fee is and that's like what is the right block size.
Peter McCormack: The reason I asked, I heard Jameson's interview, alongside Roger actually, where he was saying high fees are important to reward miners. I guess what my personal concern is then yes, we have a free market and free market pricing, but a certain price I think I read, say mainchain fees were $10, that prices out a certain significant percentage of the population. I might even have it written down here. A certain percentage… anyway, and then at $100 mainchain fees it prices out almost everyone. Bitcoin then starts to become a tool that prices out and it can end up pricing out people who maybe need it most.
If you look at the actual real-world use case at the moment, as I mentioned to you I met Alejandro from Venezuela, there's an actual use case there for people where Bitcoin is stopping people lose money; it's allowing people to survive and that's a real-world use case. Mainchain fees of £100 would kill that use case and I personally find that a little bit concerning, but that then will push people back towards Bitcoin Cash whose argument is it is for everyone.
Samson Mow: You're pricing fees in dollars, but fees are actually measured in satoshis per byte.
Peter McCormack: Of course.
Samson Mow: If you want cheap fees, then the price of Bitcoin will be low. The reason why fees are expensive was because Bitcoin prices are also spiking at the same time. So, you're measuring the satoshis per byte, which is also increasing because of the gaming of the system, but you're measuring two increases: one is the satoshi per byte cost; and price of Bitcoin. If the price of Bitcoin's always low, then the fee price will be low too. It's just part and parcel of how this system works. When the price of a Bitcoin or the asset goes up, then it's inevitable the cost to transact it will also go up.
Going back to the gold example, if the only way you could FedEx gold bars around was to use a little bit of gold, let's say an ounce of gold, then if the gold price doubled then the cost to FedEx that gold would double too, even if the price is still one ounce. It's just part and parcel of the design and that's why Lightning Network is important, because that is what's going to let everyone in the world use it because the fees to transact it will always be low.
Peter McCormack: Yes, but it still feels like the mainchain is a preserve for the wealthy and will actually end up centralising use of the mainchain to those who can afford it, which could be a quite limited number of people.
Samson Mow: Are you familiar with the concept of demurrage?
Peter McCormack: No.
Samson Mow: It's the cost to store gold.
Peter McCormack: Right.
Samson Mow: There's a term just for that. To store gold is actually expensive because you have to put it in a vault, the vault needs a guard and you have to make sure you have security cameras and everything and that's all the cost of storing gold. If you think about it, transacting on the mainchain is expensive because you're paying for security. As a miner yourself, you would stop mining at a certain point if no one was paying you to mine. If the revenue you built generated from mining dropped below a certain point you wouldn't mine it and then you would lose security for the mainchain, because not much hash rate can be attacked and that's bad.
So, the block subsidy is probably a reason why people think it should be cheap, but it should not be cheap because the subsidy is paying miners instead of the fees, which will replace that eventually.
Peter McCormack: It feels like, therefore, the Lightning Network becomes the next level of what Bitcoin is for everyone. For the majority of people to be able to use Bitcoin in the world, if we see it as a global thing, the majority of them are going to be on Lightning Network and not touch the mainchain. I don't even know how to process that and think about that.
Samson Mow: There's another way to think about it; it's like priority mail. If I want to overnight something to you, it's going to cost $100 but if I send it by snail mail, it might cost me $2. It's the same idea and this all comes down to people thinking Bitcoin is for payments only and it's the first and foremost use case. By that use case, you have to be in the next block; you want to pay the highest fee to confirm. But if you lowball the fees which you can do, you can send the payment for a few cents right now, right at this moment and it will get confirmed when it gets confirmed, it could be six hours, it could be a day, but if you're not in a rush, that's okay.
So, you could be someone in Venezuela and you want to make a mainchain transaction, you can just pay $1 or a few cents and wait for it to confirm.
Peter McCormack: I guess, therefore, what my worry is that contradicts with the idea that you should only keep a certain amount in your hot wallet that you're willing to lose, you've got no second option. Say we get to a stage where mainchain fees, just for the sake of argument, are $100 because everything's hugely successful, say you're based out of Venezuela and you're earning $500 a month and you want to save $100, you're going to have to keep most of this in a hot wallet because you can't really afford to put it back on the mainchain and then take it back off, because each time you do it, it's going to cost you $100 to put it on and $100 to put it off. So, having more money is going to give you more security. There's no cold storage option for Lightning.
Samson Mow: Not yet, but you can ask Jameson about that.
Peter McCormack: Okay, but then hopefully there will be, but you can see some of my concerns here.
Samson Mow: Yes.
Peter McCormack: We're creating tiers and services. Bitcoin felt like a libertarian idea, something for everyone and now, because of its own success it needs new technology, but the new technology is therefore partitioning who can use which bits of it based on wealth.
Samson Mow: Yeah, unless you're a communist.
Peter McCormack: Yeah.
Samson Mow: What is being asked for is that everyone has access to overnight priority mail for anything they want and it must be very cheap. It's not feasible; the technology doesn't support that unless you make certain trade-offs, which is centralising it. If it's a centralised system, yes, we can set the fees at a perfect amount and it's going to be cheap for everybody in the world, but that's a centralised system and then it can be censored. This is where censorship really matters; censorship of what you can or cannot do.
If it's a centralised system, then we go back to fiat, which is it's controlled by several large parties who can say, "Yeah, you can't transact". I think BitPay is going to prevent people from X-rated sites from accepting payments.
Peter McCormack: BitPay's going to do that?
Samson Mow: I heard. I read it; I saw it on my feed.
Peter McCormack: What do you think about that just while we're in there?
Samson Mow: They can do whatever they want, that's the thing. It's a private business and they can censor your transactions, and if we try to build a system that is controlled by five entities and those five entities can censor your transaction, that's a worse trade-off than having the fee market and having Lightning and other things.
The question is why do we expend so much energy on proof of work to have the system that is outside of anyone's control? That's the question to ask yourself.
Peter McCormack: I get it, but again I think therefore this pushes back even more so than Litecoin into one of the key Bitcoin Cash arguments in that, there is a desire to create something for everyone and, in some ways, even more so for the developing world than the developed world, because there is more of a need for it. You and I don't need Bitcoin. If we didn't have Bitcoin today, we don't need censorship-resistant payments. If Bitcoin didn't exist for you and I tomorrow, we'd still book our hotel rooms and our flights and our holidays, buy our cars and we'd live our life. What we might get with Bitcoin is something that's a bit more fun and a bit more convenient and maybe slightly lower fees, but I don't think either of us are low income either.
So, actually when I look at the crypto use cases, I actually see the biggest use cases in the countries with the faltering economies, with hyperinflation; there's an actual use case there, but we're potentially building a system which they can't afford to use. That's why I think when I try to say to people, I try and be as impartial as possible and I try and see the Bitcoin Cash argument, the two arguments I come back to are, they're at least designing something which retailers can use, okay, it's digital cash over digital gold, but they are also creating something that is better for the developing world.
Samson Mow: Maybe.
Peter McCormack: A slight concession there!
Samson Mow: The system doesn't scale. Eventually if everyone in, say, Venezuela wanted to use Bcash, the fees would go up and then what are they going to do? Keep hard forking to increase the block size or what? That's why I see Lightning as a solution, because it's actually cheaper to transact and you might commit it to the mainchain once a month or every few months if you wanted to cash out something, but it's still safe to use and it's cheap to use.
Peter McCormack: I think with Bitcoin Cash and with Lightning, we can't foresee the different problems they may come to in three years' time. There are going to be different problems, but both are going to face challenges and problems continually and both are going to probably look and find solutions. I don't know what they'll be; most likely the Bitcoin Cash one will be more centralised. Although saying that, even with Bitcoin, there was one article I read; are you aware of the article by Manny Rosenfeld?
Samson Mow: I know who he is, but I don't know if I read that article.
Peter McCormack: He did a thing where he was looking at a crazy scenario, but just say everyone in the world uses it and they do ten transactions a year. By his calculation, you would need 440-megabyte blocks. So, at some point Bitcoin would have to scale for that if it happens. If it does, those blocks are going to end up being centralised anyway.
Samson Mow: Okay, so if you want to build something for Venezuela, they could make a sidechain; you would peg in some Bitcoin and then you could set fees to zero on that chain.
Peter McCormack: I want to talk about sidechains in a moment.
Samson Mow: Okay.
Peter McCormack: That is something I did read about and I'm quite interested in, but I'm just saying the point being is that if I then go full circle, and I'm writing something at the moment about the importance of impartiality, the tribalism within Bitcoin I think stops us really objectively looking at fair arguments either side. I think there is a better use case for cryptocurrencies for the developing world than there is for the developed world. Yet, it feels like we're building it for the developed world who don't need it.
Samson Mow: I disagree with that; I think Lightning will be beneficial. The goal of Bitcoin is to have a global currency and a global currency includes everyone. So, you do need Lightning with near zero fees for the developing world.
Peter McCormack: That then comes back to my point, if it's a global currency and it is for everyone, the level of security that you have will be dependent on how wealthy you are; it's not an equal system.
Samson Mow: I don't think it depends on how wealthy you are; it's just how much you're willing to pay. Like I said, you could lowball.
Peter McCormack: That's exactly the same question, it's the same answer.
Samson Mow: That's solving a much bigger problem than a digital currency can solve; you're solving inequity.
Peter McCormack: Yeah, but why can't the starting point be to create a system that's equal for all?
Samson Mow: I don't have the answer to that.
Peter McCormack: But this is my point being, I don't think the starting point for this is, "Hold on, how do we make this fair for everyone?" At the moment, we're saying we're a free market, if you've got the money --
Samson Mow: The answer is to…
Peter McCormack: I don't know.
Samson Mow: Go full socialist. Issue a coin and give a million coins to everyone in the world.
Peter McCormack: That won't work, that won't work.
Samson Mow: See, that doesn't have any value, right. It's a very difficult problem to solve and I don't think working back from that to create a digital currency's the right way. We have Bitcoin already, it's recognised as a store of value, it's the reserve currency of all digital currencies. You can't really put this round peg into the square hole of solving inequality because it's already there; it has value. So, the best thing to do is make that value accessible to as many people as we can.
Peter McCormack: Yeah, but I guess what I worry about therefore is, the people who are building these technologies and the companies, they have a financial incentive for it to be built in the way that -- so, Blockstream, I'm not saying there is any conspiracy, but it's better for Blockstream that there are small blocks because of the technologies that are being developed.
Samson Mow: Not really.
Peter McCormack: If you're working on sidechains and peg sidechains and you're looking to monetise them, you would monetise better from smaller blocks. I'm not saying it's good for us.
Samson Mow: Not really, not really.
Peter McCormack: Okay. It feels like it would be.
Samson Mow: A sidechain can have different properties; it's not just about transactions. A lot of people get hung up on transactions per second, but it's not very interesting for a blockchain. For a blockchain, I think it's more interesting about value transacted per second. So, Bitcoin can transact tens of thousands of dollars a second; nothing else can come close to that. There's a global pool of liquidity, there's network effects in place, a lot of people have Bitcoin, Bitcoin wallets, there's a whole ecosystem and there's a lot of developers that are maintaining security on the software side and there are a lot of miners that are maintaining security on the mining side.
Peter McCormack: The key people I've bumped into today who I meet, they are going to be able to afford to use the mainchain and this isn't a problem for them. I think this is where I'm saying I see an argument for Bitcoin Cash. As much as we don't want to like what they're doing, as much as we don't like them co-opting the brand, which I don't, all these things I don't like, but they are creating something that is designed so people in developed countries can have the same security over their money as people in the developed world. You don't see that argument at all?
Samson Mow: I don't see that. I think it's just virtue signalling.
Peter McCormack: Well…
Samson Mow: They like to say, "We're solving everything for people in South America", or wherever, but they're onboarding them into a centralised system. Most of the nodes for Bitcoin Cash are in China. Is that good for the economic future of that country? I don't know, but it is a far more centralised system. If I wanted people to onboard into something, I would say get into Litecoin; at least there's no pre-mine, it's more decentralised and they're not going to force changes through arbitrarily.
Peter McCormack: I think it's a real shame if we find fault in every attempt and everything that somebody else does, because I think that's where the tribalism comes from because then that happens both sides. Everything that you do is bad, everything that Blockstream does is bad, everything Core does is bad from the Bitcoin Cash side; everything Bitcoin Cash does is bad from the small block and then we just don't get anywhere. This is why I'm always trying to find the middle ground and look at both. The one thing I kept coming back to in my notes, and I know it's getting into the socialist argument, but Bitcoin felt like a fair, open, censorship-resistant, permissionless system for everyone, but now actually it's, "Well, depends how much money you've got".
Samson Mow: Yeah, but that's the thing. The people who get in earlier are going to be at an advantage.
Peter McCormack: You're not going to get in early if you live in a Ugandan village that's only just got mobile phone coverage; you've missed out.
Samson Mow: Yeah, but that's not something that technology can solve, I think. Everyone is trying to solve the technology. I think the criticism is probably better directed at a lot of people on the blockchain industry. They're raising tons of money and they're making these platforms, but I don't think they're really trying to solve that issue you're solving, which is to make something that's accessible by everybody.
Whereas the people working on Lightning, where we've had people working on Lightning since 2015, Lightning Labs has been working on it and they haven't raised exorbitant amounts of money. ACINQ is working on Lightning. A lot of people, the engineers on these teams could easily jump ship or do their own token or something and make a ton of money, but they're not doing that; they're working on Lightning.
Peter McCormack: Okay, we've done a lot of time actually here. The only other things that I came up with on Lightning, a couple of questions I had: so a whole bunch of transactions happen in Lightning Network and the fees are charged at that time. When the channel closes and it goes to close out on the mainchain, how does it know what fees it needs to reserve in the future for when it closes?
Samson Mow: I think there's a fee estimator.
Peter McCormack: Is there a risk therefore, say a store does a whole bunch of transactions and when they go to close the channel, there's a spike in fees and they end up paying a lot more than they would expect?
Samson Mow: There's a possibility, but I think that's why a lot of people are working on improving fee estimation right now.
Peter McCormack: How long can a channel stay open for?
Samson Mow: I think it's indefinite, yeah, I think it's indefinite.
Peter McCormack: Right, so if there's volatility around the mainchain, I guess that's a risk to retailers for their profit margins at the end of the month.
Okay, thank you for this. As I learn, I'm hoping other people learn from me, because I learn in every one of these interviews I do. Can you just let me know what's coming up for you, what's coming up for Blockstream, how people can find you, whether you want to hear from people and if you do, what you want to hear from them about?
Samson Mow: Sure. Well, they can find me on Twitter; my handle's @Excellion.
Peter McCormack: What is that by the way?
Samson Mow: It's just my game name when I was playing games. What Blockstream's working on, we have lots of stuff happening all the time. We'll be launching a Liquid network soon; we have global coverage of Blockstream Satellite coming down the pipe. Yeah, hopefully C-Lightning will be in beta soon as well; there's a lot of exciting developments happening.
Peter McCormack: Brilliant. Well, I hope you enjoy Consensus. Thank you for your time. Hopefully we'll do this again sometime in the future.
Samson Mow: For sure.
Peter McCormack: Cheers.
